Friday, March 11, 2016

California Signals Continued Slowdown … Jobs Numbers Suspect? … Stock Market Analysis

“Andrew Zatlin, a leading economic forecaster and the head of Moneyball Economics, sees a general slowdown in the world’s largest economy and says California and semiconductor companies are telling a very important story about where things are headed.” Story at…
3-THINGS (Jobs Numbers Suspect?) (Real Investment Advice)
“While the BLS trumpeted 242,000 new jobs in February, wages declined 0.1% and the average workweek fell by 0.2 hours along with aggregate hours worked falling a hefty 0.4%. Furthermore, part-time work soared in February while full-time job growth was mediocre. [My cmt: I’ve already noted that the reduction in hours is the equivalent of a million jobs lost.] But even stranger was that out of the 242,000 jobs, retailing saw a massive jump of 55,000 jobs…’Starting April 2015, overall retail sales (again, including auto sales) fell below 3% on a 6-month average basis (meaning more than a one-month drop in growth rate) – and have remained closer to 2% than even 3%. In past cycles, that has meant initiation of contraction in retail trade employment and widespread recession.’” Commentary at…
The jobs disconnect seems to be due to “seasonal adjustments” and Lance Roberts says this is likely to cause future downward revisions of hiring for which the markets are unprepared. He also discussed oil prices and small business outlook.  This commentary was too long to summarize, but it was a very good read. He made a very good case for lower oil prices.
-Friday, the S&P 500 was up about 1.6% to 2022 at the close. (This is about 2pts higher than the 200-dMA.)

-VIX was down about 9% to 16.5.
-The yield on the 10-year Treasury rose to 1.98%.
Friday, the S&P 500 closed 2pts (0.1%) above the 200-dMA of 2020. While some will get very bullish and talk about how this break above the 200-dMA means the index goes to the moon, it isn’t enough to convince me.  It will need to stay there and get a bit higher.
The Overbought/Oversold Ratio remained “Overbought” Friday for the fourteenth day in a row. RSI was overbought a week ago.  Tick remains overbought and the Smart-Money indicator (based on late day action) is also overbought.  All are short-term bearish for the markets.
The size of the up-move Friday was statistically-significant and that means that the price-volume move UP exceeded my statistical parameters and, in about 60% of the time, that leads to a down-day the next day (Monday). Given that the up-day occurred near the top of a channel, I give it more credence that the future is more likely to be down (at least in the short-term). (Where one draws a channel is open to some interpretation, but now it’s definitely at a channel top.)
Volume on the NYSE was about 10% below normal Friday. That is not the way it is supposed to work.  In a bounce, volume starts out low as traders don’t believe the bottom is in.  As it proceeds, more investors pile in and the volumes improve as the rally moves higher.  Low volume on a big move like today while the Index is well into a rally seems bearish to me. It makes me suspect that the pros were selling.
This rally has lasted much longer than I expected so I may post again specifically on the rally later-on if I get time – it may have to wait till Monday.
The short-term Money Trend indicator is still suggesting downside ahead. It has been dropping for 8-straight days. The S&P 500 is up about 1% over this time frame; I expect the Index to fall. I still am holding short positions in SH and QID. So far, these trades aren’t working. 
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) is 62.9% Thursday vs. is 60.8% Thursday. (A number above 50% is usually GOOD news for the markets.)
On a longer term, the 150-day moving average of advancing stocks dipped to 50.4%. A value above 50% indicates an up-trend since slightly more stocks have advanced over the last 150-days. The McClellan Oscillator (a Breadth measure) was higher and remained firmly positive.
New-highs again outpaced New-lows. The spread (new-highs minus new-lows) was +82 Friday. (It was +66 Thursday.)   The 10-day moving average of the change in spread fell to +6. In other words, over the last 10-days, on average; the spread has INCREASED by 6 each day. Market Internals switched to positive on the markets due to falling up-volume.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting).  Of course, few trend-following systems will do well in an extreme low-volatility, nearly straight-up year like 2014.
Friday, Price, VIX & Volume were positive. Sentiment was neutral. The long-term NTSM indicator is BUY. I have not followed the guidance yet. My guess is that the Index is topping out. We’ll see.

On 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP) and on 15 Jan I reduced stock allocation to zero in long-term accounts.
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 10-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…